Wisconsin Public Power, Inc. v. F.E.R.C.

Decision Date20 July 2007
Docket NumberNo. 05-1198.,No. 05-1006.,No. 05-1427.,No. 05-1007.,No. 05-1428.,No. 05-1358.,No. 05-1203.,No. 04-1414.,No. 05-1429.,04-1414.,05-1006.,05-1007.,05-1198.,05-1203.,05-1358.,05-1427.,05-1428.,05-1429.
Citation493 F.3d 239
PartiesWISCONSIN PUBLIC POWER INC., Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent WPS Resources Corporation, et al., Intervenors.
CourtU.S. Court of Appeals — District of Columbia Circuit

Mark S. Hegedus argued the cause for petitioners Midwest Transmission Dependent Utilities and Wisconsin Public Power Inc. With him on the briefs were Cynthia S. Bogorad, David E. Pomper, Louis R. Cohen, Jonathan J. Frankel, Heather Zachary, and Michael R. Postar.

Jeffrey L. Landsman argued the cause for petitioners National Rural Electric Cooperative Association and Dairyland Power Cooperative on grandfathered agreement issues. With him on the briefs was Wallace F. Tillman.

John N. Estes, III argued the cause for petitioners Duke Energy Shared Services, Inc. and Xcel Energy Services Inc. With him on the briefs were Noel H. Symons, John L. Shepherd, Jr., J. Alexander Cooke, Floyd L. Norton, IV, Stephen M. Spina, and Joseph C. Hall.

Elizabeth E. Rylander, Attorney, and Judith A. Albert, Senior Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With them on the brief was Robert H. Solomon, Solicitor.

Stephen L. Teichler argued the cause for intervenor Midwest Independent Transmission System Operator, Inc. With him on the brief were Ilia Levitine and Stephen G. Kozey.

Cynthia S. Bogorad, David E. Pomper, Mark S. Hegedus, Louis R. Cohen, Jonathan J. Frankel, Heather Zachary, Jeffrey L. Landsman, Alan I. Robbins, and Debra D. Roby were on the brief for intervenors Wisconsin Public Power Inc., et al. in support of respondent.

John N. Estes, III, Noel H. Symons, and John L. Shepherd, Jr. were on the brief for intervenor Duke Energy Shared Services, Inc. in support of respondent.

Before: GINSBURG, Chief Judge, and GARLAND and KAVANAUGH, Circuit Judges.

Opinion for the Court filed PER CURIAM.

PER CURIAM:

The Midwest Independent System Operator, known as MISO, is a nonprofit corporation that controls the transmission of electricity over a grid spanning 15 Midwestern states. Its original tariff was approved by the Federal Energy Regulatory Commission and went into effect in 2002. Under that tariff's terms, MISO approved transmission requests, scheduled service, monitored the grid to manage congestion, and provided various ancillary services to support the regional electricity market.

On March 24, 2004, MISO filed a revised tariff with FERC. Under the new tariff, MISO administers two competitive wholesale power markets: a "day-ahead" market that allows transmission to be scheduled in advance, and a real-time or "spot" market. Among other improvements over MISO's original operations, these markets incorporate more sophisticated pricing and congestion-management mechanisms that increase the efficiency and reliability of the transmission grid. In a series of orders issued between May 2004 and September 2005, the Commission accepted the proposed tariff with modifications, and MISO's new market began operating on April 1, 2005. Three groups of petitioners now seek review of various aspects of the Commission's orders: the Transmission Dependent Utilities, who rely on MISO's transmission system and markets to buy and sell electric power to retail customers; the Transmission Owners, who are electricity sellers in MISO's markets subject to the new tariff's rules and liabilities; and the Cooperatives, who are electricity buyers under contracts predating the establishment of MISO. For the reasons that follow, we deny the petitions of the Transmission Dependents and the Transmission Owners, and we dismiss those of the Cooperatives for lack of standing.

I

Section 201(b) of the Federal Power Act (FPA) grants the Federal Energy Regulatory Commission exclusive jurisdiction over the transmission and wholesale sale of electricity in interstate commerce. See 16 U.S.C. § 824(b). Section 205 of the FPA provides that "[a]ll rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission . . . shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful." Id. § 824d(a). Section 205 also prohibits undue discrimination in rates, charges, or terms of service. See id. § 824d(b). To enforce these requirements, Section 205 requires that utilities file tariffs reflecting their rates and service terms with the Commission, which must in turn ensure that those rates and terms are just and reasonable and not unduly discriminatory. Id. § 824d(c).

A

In the mid-1990s, FERC determined that longstanding structural barriers to competition in the wholesale power market constituted undue discrimination. Since then, it has been the Commission's policy to eliminate those barriers and promote competition. This policy required a significant shift in the Commission's regulatory approach, which has in turn produced dramatic changes in the electricity industry. Because the tariff at issue in these petitions is part of that transformation, we begin with some background on the development of FERC's policy. Rather than reinventing the wheel, we borrow the following account from our opinion in Midwest ISO Transmission Owners v. FERC:

In the bad old days, utilities were vertically integrated monopolies; electricity generation, transmission, and distribution for a particular geographic area were generally provided by and under the control of a single regulated utility. Sales of those services were "bundled," meaning consumers paid a single price for generation, transmission, and distribution. As the Supreme Court observed, with blithe understatement, "[c]ompetition among utilities was not prevalent." New York v. FERC, 535 U.S. 1, 5, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002).

In its pathmarking Order No. 888, FERC required utilities that owned transmission facilities to guarantee all market participants non-discriminatory access to those facilities. See Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities, FERC Stats. & Regs. ¶ 31,036, 31,635-36 (1996) (Order No. 888). That is, FERC required all transmission-owning utilities to provide transmission service for electricity generated by others on the same basis that they provided transmission service for the electricity they themselves generated. To effectuate this introduction of competition, FERC required public utilities to "functionally unbundle" their wholesale generation and transmission services by stating separate rates for each service in a single tariff and offering transmission service under that tariff on an open-access, non-discriminatory basis. See New York, 535 U.S. at 11, 122 S.Ct. 1012; see generally California Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 397 (D.C.Cir.2004).

As the next step toward the goal of a more competitive electricity marketplace, Order No. 888 encouraged — but did not require — the development of multi-utility regional transmission organizations (RTOs). The concern was that the segmentation of the transmission grid among different utilities, even if each had functionally unbundled transmission, contributed to inefficiencies that impeded free competition in the market for electric power. Combining the different segments and placing control of the grid in one entity — an RTO — was expected to overcome these inefficiencies and promote competition. Order No. 888 at 31,730-32; see also Public Util. Dist. No. 1 of Snohomish County v. FERC, 272 F.3d 607, 610-11 (D.C.Cir. 2001). Better still if the RTO were run by an independent system operator — an ISO. As envisioned by FERC, an ISO would assume operational control — but not ownership — of the transmission facilities owned by its member utilities, thereby "separat[ing] operation of the transmission grid and access to it from economic interests in generation." Order No. 888 at 31,654; see also id. at 31,730-32. The ISO would then provide open access to the regional transmission system to all electricity generators at rates established in "a single, unbundled, grid-wide tariff that applies to all eligible users in a non-discriminatory manner." Id. at 31,731; see also California Indep. Sys. Operator Corp., 372 F.3d at 397. FERC called this type of separation of generation and transmission "operational unbundling," a step beyond "functional unbundling." Order No. 888 at 31,654. Although several parties to the 1996 rulemaking had requested that FERC require "operational unbundling" or even divestiture of transmission assets, it was FERC's considered judgment that "the less intrusive functional unbundling approach . . . is all that we must require at this time." Id. at 31,655.

By 1999, FERC had come to a less sanguine view of the curative powers of functional unbundling. In FERC's view, inefficiencies in the transmission grid and lingering opportunities for transmission owners to discriminate in their own favor remained obstacles to robust competition in the wholesale electricity market. FERC concluded that these problems could be remedied through the establishment of RTOs, explaining that "better regional coordination in areas such as maintenance of transmission and generation systems and transmission planning and operation" was necessary to address regional reliability concerns and to foster regional competition. See Regional Transmission Organizations, Order No. 2000, FERC Stats. & Regs. ¶ 31,089, 30,999 (1999) (Order No. 2000) (codified at 18 C.F.R. § 35.34) (citing Staff Report to FERC on the Causes of Wholesale Electric Pricing Abnormalities in the Midwest During June 1998, at 5-8 (Sept. 22, 1998))....

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